Eric Schmidt on Tax

What we are doing is legal. I’m rather perplexed by this debate, which has been going in the UK for some time, because I view taxes as not optional … I view that you should pay the taxes that are legally required. It’s not a debate. You pay the taxes … If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom.

Schmidt’s view that ‘you should pay the taxes that are legally required’ sits a little awkwardly with Google’s efforts in the United States to secure a tax holiday on its overseas earnings. According to Bloomberg, in 2011 Google joined Sony and Cisco in a coalition that aimed to change the rules in a move worth hundreds of billions of dollars. Much of this money will return to the US from tax havens that are used to minimise the companies’ tax liabilities in other countries, as well as in the US.

Yet in a recent Observer article Schmidt justified the low rates of tax it pays in the rest of the world by referring to the higher taxes it pays in the US:

Most of Google’s engineers are based in the US and that’s where much of our product development takes place. So we pay more taxes in the US than in any other country – around $2bn in corporate income taxes to the US government in 2012.

So the company has been lobbying for tax breaks in the same country that it uses to justify lower taxes elsewhere. Google books profits in a very low tax jurisdiction like, say, Ireland, and then lobbies to get them back to the US (and so to its shareholders in the form of dividends). This looks very much like the actions of a company that thinks taxes are optional.

In the same Observer piece, Schmidt struck a note of injured bewilderment.

When legislators are doing the lobbying and companies are articulating the law as it stands, it’s a confusing spectacle for everyone.

Well, maybe. But if Schmidt will go around saying that he doesn’t think taxes are optional when his company is trying to opt out of its tax obligations by lobbying legislators he can hardly be surprised at the resulting confusion.